the do’s and don’ts mgment - nv...the do’s and don’ts of investment success nerina visser...
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The Do’s and Don’tsof
Investment Success
Nerina Visser
ETF Strategist
etfSA.co.za
Wealth Management
Investment Seminar
Oct/Nov 2019
It’s tough to make predictionsespecially about the future!
All-WeatherInvestment Strategies
1. Diversification
▪ Asset classes
❑ Equities, Bonds, Property, Commodities, etc.
▪Geographic
❑ Local – Global; Developed Markets – Emerging Markets; Specific countries; Specific currencies; Different economic cycles, etc.
▪ Industries
❑ Resources; Financial; Industrial; Consumer; Utilities; Telecomms, Technology, etc.
1. Diversification
Investment Style / Strategy – “smart” beta
▪Factors – alpha-generating
❑ Value; Momentum; Quality; Size (small caps); Low
Volatility; Dividends, etc.
▪Themes – desired exposure
❑ Shari’ah-compliant; ESG; Ethical investments, etc.
1. Diversification – factors
15 year risk and return – absolute (US). Data as of 31/3/2018. Source: S&P Dow Jones Indices LLC and/or its affiliates. Illustrative purposes only.
“There are only two numbers
you can trust in financial
statements:
the page numbers, and
the dividend
2. Dividend Strategies
2. Dividend Strategies
▪Dividends dominate returns
“Dividends and the Three Dwarfs”, Robert D. ArnottGrowth of $100 invested in US Equities 1802-2002Sources: Based on Schwert (1990) data for 1801-1870, a blendof Schwert and Siegel (2002) data for 1871-1925 and S&P 500Index data since 1926
200 year total return on US equities = 7.9% p.a.Return from dividends = 5.0% p.a.Return from inflation = 1.4% p.a.Return from real growth in dividends = 0.8% p.a.Return from changes in valuation = 0.6% p.a.
2. Dividend Strategies
▪Tax considerations
❑ Dividends are a growing share of personal income (from 2.7% in 1981 to 6.5% in 2018), to the detriment of interestincome (declined from 15.5% to 9.2% over same period)
Source: Bureau of Economic AnalysisData as of 31 December 2018
2. Dividend Strategies
▪Listed Property / REITs?
❑ Differentiate between volatility in share price, and consistency of dividends paid
Source: Profile Data
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Growthpoint Property (GRT) – share price and annual dividends, 10 years to Oct-19
2. Dividend Strategies
▪Can be used for low / medium / high risk
❑ Low risk:• Preference shares – lowest capital risk / price volatility
❑ Medium risk:• High dividend shares – medium capital risk / price volatility
❑ High risk:• Property shares – highest capital risk / price volatility
3. Differentiation
▪Different investment accounts with different strategies
for different purposes
❑ Time horizon
❑ Investment objective
❑ “Wrapper” pros and cons
▪Design asset allocation consistent with requirements
Next level!
▪Drip-feed / Dollar-cost averaging
▪Dogma
▪Dead wood
▪Due Diligence
▪Direction (ESG / Impact investing / Invest with Purpose)
▪Don’t fiddle!
3D – in practise
▪etfSA Retirement Annuity Fund – five portfolios
to suit different investor needs, incorporating
❑ Diversification
❑ Dividend strategies
❑ Differentiation
etfSA Retirement Annuity Fund
▪ Wealth Enhancer Portfolio – above-average returns over long term (>10 years), with a high
tolerance for risk
▪ Wealth Builder Portfolio – broadly diversified exposure to asset classes, investment styles and
geographies
▪ Wealth Conservator Portfolio – prioritise income generation from different sources – interest,
dividends and other distributions, both domestic and global
▪ Wealth Protector Portfolio – a cash-only investment of highest credit quality for risk averse
members, no risk of a capital loss
▪ Wealth Default Portfolio – static strategic asset allocation into a limited range of vanilla asset
class ETPs, to comply with Section 36 of the Pension Funds Act
etfSA RA Wealth Enhancer
SA Interest bearing
10%
SA Equity44%
SA Property
6%
Inter-national
40%
Asset class Reg. 28 Category Description Weight (%)
Cash (max 100%) Cash 5.4
NewFunds GOVI ETF 4.8
CoreShares SA Top50 ETF 9.7
Satrix FINI15 ETF 4.7
Satrix INDI25 ETF 4.6
Satrix RESI10 ETF 4.9
Ashburton Mid Cap ETF 6.0
NewFunds Equity Momentum ETF 6.0
NewFunds Tgt Vol High Growth Equity ETF 3.0
Coreshares Dividend Aristocrats ETF 5.0
Stanlib Property ETF 2.8
Proptrax Ten ETF 3.0
Sygnia Itrix S&P 500 ETF 3.1
iShares MSCI World ESG Enhanced ETF 3.3
CoreShares Global Dividend Aristocarts ETF 3.1
Satrix MSCI Emerging Market ETF 4.0
iShares MSCI China ETF 4.5
iShares MSCI India ETF 4.5
AMI Africa ex SA Big50 ETF 2.9
iShares JP Morgan EM Bond ETF 2.3
iShares Global Infrastructure ETF 2.6
NewGold ETF 4.3
NewPalladium ETF 2.8
NewPlatinum ETF 2.7
Offshore
Foreign exposure
(max 30% +
10% in Africa)
Commodities Physical (max 10%)
SA Interest
bearing Debt (max 75%)
SA PropertyImmovable Property
(max 25%)
SA Equity Equities (max 75%)
As at 30-Sep-19
SA Interest bearing
20%
SA Equity39%
SA Property
10%
Inter-national
31%
Asset class Reg. 28 Category Description Weight (%)
Cash (max 100%) Cash 10.5
NewFunds GOVI ETF 5.0
CoreShares Preftrax ETF 4.9
CoreShares SA Top50 ETF 9.9
Satrix INDI25 ETF 5.6
Ashburton Mid Cap ETF 5.9
Satrix Quality ETF 3.0
Satrix RAFI40 ETF 5.0
NewFunds Tgt Vol High Growth Equity ETF 3.9
Coreshares Dividend Aristocrats ETF 2.9
Satrix DIVI ETF 2.9
Stanlib Property ETF 4.9
Proptrax Ten ETF 4.7
Satrix MSCI World ETF 8.2
Sygnia Itrix S&P 500 ETF 5.1
CoreShares Global Dividend Aristocarts ETF 4.1
Satrix MSCI Emerging Market ETF 3.9
DBX-Trackers MSCI China ETN 3.4
Standard Bank AfricaGold ETF 3.0
NewGold Platinum ETF 3.1
Offshore
Foreign exposure
(max 30% +
10% in Africa)
Commodities Physical (max 10%)
SA Interest
bearing Debt (max 75%)
SA Equity Equities (max 75%)
SA PropertyImmovable Property
(max 25%)
etfSA RA Wealth Builder
As at 30-Sep-19
SA Interest bearing
41%
SA Equity30%
SA Property
8%
Inter-national
21%
etfSA RA Wealth ConservatorAsset class Reg. 28 Category Description Weight (%)
Cash (max 100%) Cash 19.5
NewFunds GOVI ETF 10.3
CoreShares PrefTrax ETF 10.2
CoreShares SA Top50 ETF 9.9
Satrix FINI15 ETF 4.6
Satrix Quality ETF 4.9
CoreShares Dividend Aristocrats ETF 4.8
Satrix Divi+ ETF 4.8
Satrix Property ETF 2.9
Stanlib Property ETF 4.0
Proptrax Ten ETF 3.7
Satrix MSCI World ETF 8.0
CoreShares Global Dividend Aristocarts ETF 4.6
Satrix MSCI Emerging Market ETF 3.4
iShares Preferred & Income Securities ETF 4.4
SA Interest
bearing Debt (max 75%)
SA Equity Equities (max 75%)
SA PropertyImmovable Property
(max 25%)
Offshore
Foreign exposure
(max 30% +
10% in Africa)
As at 30-Sep-19
SA Interest bearing100%
etfSA RA Wealth Protector
Asset class Reg. 28 Category Bank and Call Deposits Weight (%)
Nedbank 24.8
Standard Bank 20.0
Firstrand Bank 18.7
ABSA 16.8
Investec 8.4
Nedgroup CIS 3.1
Southchester 2.7
Bank of China 2.1
Other 3.2
SA Interest
bearingCash (max 100%)
As at 30-Sep-19
Asset class Reg. 28 Category Description Weight (%)
Cash (max 100%) Cash 10.5
NewFunds GOVI ETF 19.8
CoreShares SA Top50 ETF 31.9
CoreShares Proptrax SAPY ETF 10.1
Satrix MSCI World ETF 27.7Offshore
Foreign exposure
(max 30% +
10% in Africa)
SA Interest bearing
Debt (max 75%)
SA Equity Equities (max 75%)
SA PropertyImmovable Property
(max 25%)
SA Interest bearing
30%
SA Equity32%
SA Property
10%
Inter-national
28%
etfSA RA Wealth Default
As at 30-Sep-19
etfSA Living Annuity
▪Same five portfolios as for the RA Fund
▪One additional portfolio – Wealth Maximiser –
not Reg. 28 compliant (does not need to be)
▪Can accommodate personalised portfolios for
investments of > R5m, e.g. 100% offshore
SA Equity41%
SA Property
8%
Inter-national
51%
etfSA LA Wealth Maximiser
Asset class Description Weight (%)
Coreshares SA Top50 ETF 6.9
Satrix FINI ETF 3.9
Satrix INDI ETF 4.8
Ashburton Mid Cap ETF 6.9
Coreshares Sci-Beta MF ETF 3.0
NewFunds Tgt Vol High Growth Equity ETF 5.0
NewFunds Equity Momentum ETF 6.1
Coreshares Dividend Aristocrats ETF 4.9
Satrix Property ETF 4.0
Proptrax Ten ETF 3.9
Satrix MSCI World ETF 7.3
Sygnia Itrix S&P 500 ETF 3.1
CoreShares Global Dividend Aristocarts ETF 8.2
CoreShares Global Property ETF 4.3
Satrix MSCI Emerging Market ETF 6.0
DBX-Trackers MSCI China ETN 5.9
Firstrand USD Custodial Certificates 3.7
AMI Africa ex-SA Big50 ETF 6.0
Standard Bank AfricaPlatinum ETF 2.9
NewGold Palladium ETN 3.2Commodities
Offshore
SA Equity
SA Property
As at 30-Sep-19
Invest with the “ETF specialists”
Contact Details
Discretionary Investments 010 446 0371 [email protected]
Tax Free Investment Accounts 010 446 0371 [email protected]
RA Funds 010 446 0374 [email protected]
Living Annuity Funds 010 446 0374 [email protected]
Portfolio Management Service 010 446 0372 [email protected]
Nerina Visser 010 446 0376 [email protected]
Mike Brown 010 446 0377 [email protected]
Website: www.etfsa.co.za
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